Buying shares on the NZX – Sharesies vs ASB Securities and Direct Broking

There’s a new kid on the block. Previously ASB Securities (owned by ASB Bank) and Direct Broking (owned by Jarden) were the cheapest brokers to buy and sell shares in individual companies listed on the New Zealand sharemarket (NZX). We now have Sharesies, a popular Fund Platform with over 60,000 users, offering this service. How does it stack up against the traditional share brokers?

This article is a comparison between Sharesies, ASB Securities, and Direct Broking across criteria such as fees, user experience, ownership of shares, and other features. Because the Sharesies share trading feature is in beta, aspects of this comparison are likely to change as their functionality is gradually improved.

1. What’s on offer?

There are around 140 individual companies listed on the NZX. Chances are you already interact with some of these companies on a regular basis – such as Meridian Energy, Spark, Air New Zealand, The Warehouse, Westpac Bank, and Burger Fuel. By buying shares in one of these companies, you become a shareholder, and own part of the company!

ASB Securities and Direct Broking allows you to buy and sell shares in any of these ~140 companies. Sharesies also allows you to invest in all companies, except for:

  • AFC Group (AFC)
  • Aorere Resources (AOR)
  • CSM Group (CSM)
  • Livestock Improvement Corp (LIC)
  • Promisia Integrative Ltd (PIL)
  • SeaDragon (SEA)
  • Southern Charter Financial Group (SNC)

However, these companies are very small, and extremely illiquid (meaning there aren’t many people buying or selling shares in these companies on a day to day basis). Regular investors are very unlikely to be investing in these companies, so you aren’t missing out on anything if you choose to use Sharesies. Sharesies’ full list of individual companies you can invest in through their platform can be found here.

Winner: Tie

2. Minimum investment

Sharesies

The minimum investment amount with Sharesies remains at a super-low $0.01. Sharesies offers fractional share investing, so even if a share costs more than the amount of money you want to invest, you can still buy a fraction of that share.

investing in Spark on Sharesies
Investing $1 in Spark got me 0.2522 shares in the company

ASB Securities and Direct Broking

Investors using ASB Securities or Direct Broking must buy enough shares to meet NZX minimum holding requirements. This requirement is currently $1,000.

Winner: Sharesies

3. Brokerage Fees

Brokers charge brokerage fees on every trade i.e. whenever you buy or sell shares. The brokerage fees for each service are:

Sharesies0.5% for trades up to $3,000
Plus 0.1% for amounts above $3,000
ASB Securities$15 for trades up to $1,000
$30 for trades between $1,000 and $10,000
0.3% for trades over $10,000
Direct Broking$29.90 for trades up to $15,000
Plus 0.2% for amounts above $15,000

The table below shows the brokerage fee that would apply to different dollar amounts invested (ASB Securities and Direct Broking show n/a for $100 invested because this falls below the minimum investment amount).

brokerage fees comparison

The result is that Sharesies is significantly cheaper, especially for smaller investment amounts. The only thing to watch out for when brokerage is so cheap, is that it could facilitate “taking a punt” or “dabbling” in various companies, while high brokerage fees encourages investors to thoroughly evaluate a company before investing.

Winner: Sharesies

4. Total cost of ownership

With Sharesies, brokerage is not the only fee you’ll pay. Sharesies will charge you a monthly/annual account fee, while ASB Securities and Direct Broking don’t.

Sharesies fees
Sharesies account fee

Therefore we need to factor the account fee into the total cost of owning your shares. The total cost of owning your shares includes:

  • Brokerage fees to buy the shares
  • Account fees to hold the shares
  • Brokerage fees to sell the shares

The table below compares the total cost of ownership over 10 years (given shares are a long-term investment), of shares bought through each broker, for various portfolio sizes, and various number of companies in the portfolio:

Most of the time buying shares through ASB Securities or Direct Broking will give you the lowest cost of ownership (e.g. a $10,000 portfolio spread evenly across 3 different shares has a total cost of ownership of $396 on Sharesies and $180 on Direct Broking). Direct Broking is like buying a more expensive car upfront, and never having to pay anything to maintain it, while Sharesies is like buying a cheap car, but having to pay for maintenance regularly.

However, Sharesies does work out cheaper overall when you’re investing in smaller parcels of shares. Just be careful that with small investment amounts, their account fee makes up a horribly large percentage of your portfolio.

Winner: ASB Securities and Direct Broking

5. User experience

Sharesies

In typical Sharesies fashion, they have provided a fantastic user experience for buying shares. The user interface is uncluttered, easy to navigate, and works great on mobile.

Sharesies companies UI

There is still room for improvement though, and I would say the following are the current weak points of the interface:

  • You can sort the companies list by “Highest annual dividends” and “Highest annual returns”. This is very concerning – given Sharesies’ targets beginner investors, this feature could encourage investing based simply on the biggest dividends and biggest returns. This is absolutely NOT a good investment strategy. Past performance is not an indicator of future performance, and the very highest paying dividend companies are almost always “Dividend Traps“.
  • Sharesies displays each company’s gross dividend yield, but their data for this is often totally inaccurate.
  • You can’t see fundamental company statistics such as market capitalisation, P/E ratio, and Net Tangible Assets, nor can you see any important company announcements. However this data is publicly available on the NZX website.
  • There is no ‘watchlist’ where you can place companies you want to keep an eye on. This feature is standard in other brokers.
Sharesies companies
It’s not the best idea to offer beginner investors the ability to sort by highest returns and dividends

ASB Securities and Direct Broking

These interfaces are dated, cluttered, and unfriendly compared to Sharesies. They don’t offer a mobile friendly view either. I’ll let the screenshots do the talking.

Direct Broking UI
Direct Broking’s interface. Not too bad, but not the best.
ASB Securities UI
ASB Securities’ interface. Needs improvement.

Winner: Sharesies

6. Ownership of shares

Sharesies

When you buy shares through Sharesies, you do not get direct ownership of them. Instead they are owned by a “Sharesies Nominee” which is a custodian holding the shares on your behalf. This has a number of implications:

  • You can only sell your shares via Sharesies, so you’re locked into using their platform and paying their account fees.
  • You can’t participate in Dividend Reinvestment Plans (DRPs). DRPs are plans offered by some companies, allowing shareholders to automatically reinvest their dividends into buying more shares, with no brokerage costs, and usually at a discounted price. DRPs are a great way to grow and compound your investment. With Sharesies, your dividends are always paid as cash into your wallet.
  • It is unclear how Sharesies will handle “corporate actions” on your shares. There is no guarantee you’ll get the full benefits of being a shareholder like being able to vote on important company issues, or participating in rights offers (where companies sell new shares to existing shareholders to raise more capital).

“You acknowledge that we don’t have to forward to you, or take any action on, reports, notices, proxy forms, or other communications we receive about Investments in your Portfolio.”

Sharesies Terms and Conditions

Further Reading:
What happens to your money if InvestNow or Sharesies go bust?

ASB Securities and Direct Broking

Shares bought through ASB Securities and Direct Broking are held under your CSN (Common Shareholder Number). This allows you to buy and sell your shares through any share broker. This also means that your shares are held directly in your name on a company’s share registry.

Having direct ownership gives you the full benefits of being able to participate in DRPs, corporate actions, and Annual General Meetings for the shares that you own.

Winner: ASB Securities and Direct Broking

7. Trading features

Sharesies’ basic, but elegant interface becomes a disadvantage here as it is missing features you’d expect to find with a traditional broker. These features are:

Live market prices and depth

The share prices are shown on Sharesies are delayed by at least 20 minutes. Because share prices can be volatile, the delay can be problematic as the price of a share could surge, but not be reflected in the price you see on Sharesies.

Meanwhile, ASB Securities and Direct Broking show live prices (as long as you have traded with them in the last 90 days), as well as market depth which is a list of buy and sell orders for a particular share.

Market depth

Limit orders

When you buy shares through Sharesies, you place a market order, which means the price you buy your shares at depends on the current selling price. Using the above Spark depth chart as an example, a market order will get you shares at a price of $3.95 per share. This is a slight premium over the current $3.925 share price.

ASB Securities and Direct Broking allow you to place limit orders. This allows you to specify a maximum price you’re willing to pay for the shares, providing you with more control and certainty.

limit order
Placing a limit order for Spark at $3.93 per share

Advanced Features

Sharesies also do not offer:

  • Trigger orders – an instruction to place an order to buy or sell a share if it reaches a certain price
  • Margin lending – the ability to borrow money to trade shares in order to leverage your investment (similar to a mortgage)

Winner: ASB Securities and Direct Broking

Conclusion

If you are serious about investing in shares for the long-term, and have a decent amount of money to do so, stick with a traditional broker. Although the upfront brokerage costs will be more expensive, the total cost of ownership will be lower. You will directly own the shares under your name, won’t be locked in to Sharesies for holding and selling the shares, and can fully participate in any DRPs, rights issues, and voting.

Don’t write off Sharesies as an option for investing in shares though. They offer low-cost brokerage and ultra-low minimum investment amounts, meaning it’s perfect if you want to invest small amounts to learn, and/or slowly build up a share portfolio over time (particularly if you are already paying for a Sharesies account to invest in their Funds).

However, those with small portfolios may want to consider sticking to investing in funds rather than individual companies, due to their convenience and instant diversification benefits. See my comparison between investing in funds vs individual companies to help you decide.

If you’re keen to start building your investment portfolio with Sharesies, you can sign up with this link, and I’ll get $5 in my own Sharesies account. A great way to show your support for this site!

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Disclaimer

The content of this article is based on my personal opinion and should not be considered financial advice. The information should never be used without first assessing your own personal and financial situation, and conducting your own research. You may wish to consult with an authorised financial adviser before making any investment decisions.